Tuesday, September 17, 2002

Krugman's latest, attacking Thomas White, and some guy named Cheney who's apparently the vice president or something, seems extra-vicious. And also more important than stories like this one, which details the evil machinations of an obscure section of the OMB called the Office of Information and Regulatory Affairs.

Here's an excerpt from the WSJ article Krugman refers to on the Cali energy market:

High prices and growing shortages had turned California into an energy bazaar with mind-boggling deals, such as the one engineered by Mr. Tish on Nov. 11. Here's how it went down: National Energy had bought 50 megawatts of power from the Imperial Irrigation District for $3,500 at a trading hub in Arizona, and immediately sold it for the same amount to the Los Angeles Department of Water and Power. National Energy then repurchased the power from DWP at the Oregon border for $4,750, and sold it to Constellation Energy Group Inc. for $7,500. Constellation then moved the power back into California and sold it to the ISO for $12,500, or the then-price cap of $250 a megawatt-hour.

The fact that the trades concluded at the highest legal price at a time of low demand shows just how warped the market had become. The ISO's lower price caps seemed to have the perverse effect of raising prices during off-peak hours.

The deal was "printing like, really good money," Mr. Tish later told a colleague, Dave Pierce, according to a transcript submitted to state investigators. But when the parties tried to repeat the deal an hour later, the ISO refused. Mr. Pierce later called the ISO, seeking clarification on the rules and training sessions. ISO grid coordinator Matthew Cartier suggested talking to Enron. "Those guys are pretty aware," Mr. Cartier said, according to the transcript. And, "their integrity seems to be pretty good."